We audited BLM Companies LLC, a contracted field service manager in HUD’s real estate-owned Management and Marketing III program, as part of the activities included in our 2017 annual audit plan and because it was the sole contractor performing property preservation and protection services for U.S. Department of Housing and Urban Development (HUD)-acquired properties located in Ohio. Our audit objective was to determine whether BLM provided property preservation and protection services in accordance with its contract with HUD and its own requirements.
BLM did not provide property preservation and protection services in accordance with its contract with HUD and its own requirements. Specifically, it did not ensure that it performed adequate initial services before recently acquired HUD-owned properties were promoted to ready-to-show status. BLM also did not ensure that HUD-owned and custodial properties were maintained in accordance with its contract with HUD. As a result, HUD lacked assurance that BLM maintained the properties in a manner that preserves communities and the value of the properties. Further, BLM inappropriately received more than $25,000 in management fees for properties that were not maintained in accordance with its contract. If BLM does not improve its process for performing property preservation and protection services, HUD could inappropriately pay $594,000 in monthly routine inspection fees for properties that are not maintained in accordance with its contract requirements over the next year.
We recommend that HUD require BLM to (1) certify and support that the applicable deficiencies have been corrected for the 8 of 109 properties cited, (2) reimburse HUD more than $25,000 for properties that did not receive proper preservation and protection services, and (3) implement adequate procedures and controls to ensure that all properties comply with its contract with HUD and its own requirements to prevent $594,000 in HUD funds from being spent over the next year on management fees for properties that are not adequately maintained. Further, we recommend that HUD assess BLM’s performance at least quarterly and if its performance does not improve, HUD should determine whether BLM has defaulted on its contract and take the appropriate actions.
Recommendations
Housing
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Status2017-CH-1011-001-AOpenClosedClosed on Septiembre 03, 2019
Certify and provide supporting documentation showing that the identified deficiencies have been corrected for the 8 of 109 properties cited in this audit report.
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Status2017-CH-1011-001-BOpenClosed$19,280.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on Septiembre 25, 2020Reimburse HUD $19,280 in ineligible management fees for 20 properties for which initial services were improperly performed before promotion to ready-to-show status.
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Status2017-CH-1011-001-COpenClosed$6,525.00Questioned Costs
Recommendations with questioned costs identify costs: (A) resulting from an alleged violation of a law, regulation, contract, grant, or other document or agreement governing the use of Federal funds; (B) that are not supported by adequate documentation (also known as an unsupported cost); or (C) that appear unnecessary or unreasonable.
Closed on Septiembre 25, 2020Reimburse HUD $6,525 in ineligible routine inspection fees for 93 properties that contained property preservation and protection deficiencies.
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Status2017-CH-1011-001-DOpenClosed$594,000.00Funds Put to Better Use
Recommendations that funds be put to better use estimate funds that could be used more efficiently. For example, recommendations that funds be put to better use could result in reductions in spending, deobligation of funds, or avoidance of unnecessary spending.
Closed on Septiembre 03, 2019Improve its quality control procedures to accurately track and conduct reviews in a manner that ensures all properties in its active inventory comply with HUD’s and its own requirements to prevent $594,000 in monthly routine inspection fees from being spent over the next year for properties that are not adequately maintained. The quality control procedures should include but not limited to continued training of BLM’s staff and subcontractors on properly identifying and addressing property deficiencies; maintaining sufficient documentation of its monthly quality control reviews and corrective actions; verifying that the datestamped photographs were for the corresponding inspection dates; and regularly updating its tracking mechanism for desktop reviews of inspections to ensure that it conducts desktop reviews for properties that are still in its inventory.
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Status2017-CH-1011-001-EOpenClosedClosed on Septiembre 03, 2019
Assess BLM’s performance under the area 4P contract at least quarterly to determine whether it has improved its performance. If its performance does not improve, HUD in coordination with the Office of the Chief Procurement Officer should determine whether BLM has defaulted on its contract and take the appropriate actions.